I mentioned, not for the first time, back in April, that a large part of the financial bubble before it burst was caused by the ratings agencies who grade each investment. You will recall that a lot of these new financial products were rated AAA until overnight they were found to be worthless. Incredibly, the ratings agencies are paid, not by the people who make use of the rating (the investors) but by the people borrowing the money.
Nothing has changed since the bubble burst. The delightfully named Banco Espirito Santo has fired its ratings agency, Fitch, for reducing its rating from A to BBB+. The bank's spokesman said the move 'does not reflect the financial soundness of the bank'. But who would possibly believe him?
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